Managing the rising costs to maintain your business is becoming extremely difficult. While eCommerce has become progressively popular since the global pandemic, fulfillment and storage rates have been steadily increasing for years. Supply chains have been stretched, and the need for capacity has escalated, causing shipping costs and warehouse rent to get out of hand. The labor shortage adds on to these financial obstacles and trying to keep operations afloat has become strenuous.
Rising inflation over the past few years has further burdened those doing fulfillment in-house with never ending costs. The overbearing expectations of managing and maintaining customer demands adds to the weight of keeping a business alive. The perpetual hurdles being thrown at businesses is requiring e-merchants to turn to cost management to mitigate rising fees.
Why Are Costs Rising?
Warehousing pricing and shipping rates have been steadily rising for years. While yearly cost adjustments are expected, rising fees are typically an indication of disruptions to the specialized supply chain.
Rental costs and purchase prices for warehouses has increased due to the high demand for capacity. Labor, building supplies, and lead times have also increased significantly because of disruptions in the global and regional supply chains.
What can businesses do to mitigate these rising fees? There are multiple strategies e-merchants can introduce to cut down these costs and create an environment where your business can thrive.
Tips for Lowering Costs
Ensure Inventory Accuracy—By keeping an accurate count of your inventory, you can reduce costs across many areas. Having an up-to-date inventory prevents unnecessary purchases from your supplier, avoidable labor costs, and delays. Refining reverse logistics would also help maintain an accurate inventory. Reverse logistics not only forms a sustainable supply chain but also helps with managing returns or damaged goods.
Optimizing your warehouse layout additionally falls under keeping an accurate track of your inventory. By moving popular products to more accessible areas and reducing slow moving SKUs, efficiency can be improved. Higher efficiency means lower processing time which decreases your storage rates.
Employee Management—Making sure your employees are well trained and efficient can further reduce costs. Improving your training methods ensures your employees reach 100% effectiveness faster. Without ample training, your labor costs can double, and valuable time is spent trying to re-train your employees.
Once employees are trained, a productivity standard can be put in place to ensure consistent performance and reduction of fulfillment costs. Gaps in staffing can also be identified through these standards. Good management of employees and their operations increases employee retention, saving money in recruitment, training, and error mitigation costs. Efficient employees improve key performance indicators that reduce costs and customer dissatisfaction. Overall, reliable employees can save you precious time and money.
Maximize Shipping—There are many ways to reduce the cost of shipping. Start by consolidating shipping loads. Organizing orders to gear towards customers from the same geographical location allows for a single shipment. Freight costs can also be lowered by using SKU evaluation to identify and prioritize the shipment of products that perform best.
Changing your shipping location can further reduce shipment fees. By shipping from a warehouse in a cheaper secondary market—such as Phoenix instead of Los Angeles—inventory is placed closer to customers. If you use USPS, UPS, or DHL, better rates can be achieved by using freight aggregators like Shippo. Shipping materials contribute to shipping costs as well, so making a switch from boxes to bags or allowing customers to personalize their shipping experience would cut down on shipping rates.
Convert to Digital Operations—Digital management can identify optimal shipping routes, rates, and arrangements that would originally be decided by guessing. This lowers logistics costs up to 40%. Employees also become more efficient and avoid errors by using automation. Smart warehouses allow for real time reports on inventory and processes from a remote location. Having access to these reports helps identify avoidable fees that need to be eliminated.
Last Tip: Consider Outsourcing Fulfillment
Fulfillment companies are a great outside source that will help reduce warehousing and fulfillment costs. Also known as 3PL Companies, fulfillment centers have better relationships with carriers, a specialty in packaging, and offer high reliability.
Better carrier rates are achievable through fulfillment companies. National carriers work directly with fulfillment providers, allowing better deals and contract negotiations to take place. Fulfillment companies receive deals that reduce shipping costs per item, and lowering these prices can give your business a lead on potential competition. National carriers also frequent fulfillment provider warehouses, so your business will receive more attention than you typically would when doing fulfillment in-house.
When it comes to reducing storage costs, 3PL warehouses can take in product overflow. 3PL warehouses charge by the pallet while managing pallet in and pallet out scenarios. Outsourcing for overflow storage reduces storage costs by providing a cheaper option than renting or leasing another storage space.
A pay-for-use model is also used in outsourcing fulfillment. This means that businesses only pay for the services being used—such as space needed, receiving needed per month, and the number of orders processed. Therefore, storage fees and unnecessary employee hours are significantly reduced, adding to the benefits offered by outsourced fulfillment pricing.
Fulfillment companies specialize in packaging. With fulfillment companies, you have more packaging options that will best benefit your products. The wrong box can increase the dimensional or actual weight of your product and raise the shipping cost. By providing a wider range of packaging options, fulfillment companies ensure you are not paying more than necessary to ship an item.
Customer loyalty is essential to maintaining your business. Fulfillment companies make sure packages arrive on time and in good condition. This improves the likelihood that customers will buy from your business again. Increasing customer satisfaction boosts future orders which brings in more revenue for your business.
Managing Rising Warehousing and Fulfillment Costs is Essential
Managing warehousing and fulfillment costs increases the likelihood of your business’ survival. Examining shipping costs, warehouse management, and labor management can improve operations while maintaining customer satisfaction. Managing your warehousing and fulfillment costs is necessary for survival, so companies that position themselves well during times of inflation are better equipped to maintain their competitive edge and ensure future success.